NBN project in Australia costing more than projected

09 August 2012 | Kavit Majithia

An updated report on Australia’s NBN Co’s broadband network revealed the project will cost an additional A$4.6 billion to build and operate over 10 years.

The corporate plan did reveal that revenue targets are being exceeded, and it is thought NBN Co will take in more revenue from 2018, with projections that annual revenues will reach A$10 billion by 2028, A$1.5 billion higher than first thought.

Under new plans, the company said that homes will automatically be connected to the National Broadband Network (NBN) through fibre links that connect the street to a hub on each premise. This requires home owners to opt out of the scheme if they do not want the NBN connection, rather than opt in, which should increase the number of subscribers but also increase the capital cost of the network by 3.9%.

13,500 premises in Australia were connected to broadband by fibre, fixed wireless or satellite in June this year, and this is expected to increase by a total of 92,000 by mid-2013.

NBN Co said by the time the next federal election comes around in 2014, there should be half a million premises connected to broadband services. This is behind projections reported in a corporate plan released in December 2010 which forecast NBN Co would have 419,000 connected premises by June 2013.

Since the previous plan was released, NBN Co has signed a 40-year deal with Australian operator Telstra to use its infrastructure, from which Telstra stands to make $11 billion.

In addition, NBN Co has signed an $800 million deal with Optus, which it expects will bring in an additional 500,000 customers on the network.

The company’s chief executive, Mike Quigley, said costs were expected to decrease after 2012, largely because 20% of its potential customer base will take up satellite and wireless services.

Other changes include making the take-up of bulky battery back up boxes optional for customers, which proved a big source of complaints for users. This development is expected to save the company hundreds of millions of dollars.

Total investment made by the government in the NBN Co project is expected to reach A$30.4 billion, up from A$27.5 billion, with operating expenditure reaching A$26.4 billion between now and 2021.